Study: Lower profits expected due to higher wage demands

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U.S. employers can expect lower profits in 2019 due to rising labor costs and slow revenue growth, a new report from The Conference Board predicted. Organizations to face the biggest losses may be those employing many blue-collar workers, who, according to the report, have demanded higher pay because of their scarcity.

According to the report, a surplus of jobs and low number of available workers has led employers to adjust job qualifications and offer telecommuting to retain talent in those conditions, which may also contribute to their profit losses. The report laid out other trends influencing profits for 2019: 1) less wage inequality; 2) lower educational requirements; 3) poor labor quality; and 4) more employees working from home.

"Because this labor market is brimming with job opportunities, employers are struggling to fill open positions and retain workers," Elizabeth Crofoot, a senior economist at The Conference Board, said in a statement. "To attract quality workers, employers are taking steps to make their jobs more appealing, not only by raising wages, but by enhancing benefits, increasing job flexibility, and providing more meaningful work."

The report points out more workers are voluntarily leaving their jobs, even though unemployment has been historically low for months. One explanation for the increasing turnover could be that employees understand the power they wield in a tight labor market and are willing to move on to jobs offering better pay, opportunities and benefits. In response to this pressure, some employers in blue-collar sectors have increased wages, including Walmart, which increased its average driver salary to $87,500 and introduced a mentorship program to combat a longtime truck driver shortage.

Two other trends in the report are worth noting: concern about the quality of work and lower education requirements. Talent shortages are prompting employers to rethink educational requirements by first deciding whether a job requires a college degree and then altering their recruitment strategies to reflect the change. The challenge for HR departments and talent professionals is filling those jobs quickly without sacrificing the quality of talent.